Food for thought: John Day moved past restaurant stocks to build a hot investment firm.

• Author: Mildenberg, David
• Position: Statewide: BUSINESS NEWS FROM ACROSS NORTH CAROLINA

It hasn't stopped the presidential candidates from hatin' on them, but most hedge-fund managers have struggled in recent years to match the Joe Sixpacks who buy and hold the basic stock-market indexes. Raleigh money managers John Day and Sheldon Fox have proven the exception, ranking first in North Carolina and 39th nationally among managers with more than $300 million in assets, according to a. survey by Barron's magazine that tracked performance between 2012 and 2014. Toppping the averages was not easy in that period, as the stock market soared. But Day and Fox made enough smart selections that KDI Capital Partners Inc.'s main fund had an annual average return of 20.2%, almost triple the 7.4% average of U.S. hedge funds, according to Barron's. KDI looks even better stretching back to 2008, when the U.S. stock market plunged. Since then, it has gained almost 10% a year, compared with about 7.3% for the Standard & Poor's 500 Index.

Money management is a huge business in North Carolina with about 20 money managers based in the state each overseeing more than $1 billion in assets, according to market researcher BrightScope Inc. That doesn't include national giants such as Morgan Stanley or Vanguard. With about $430 million as of June 30, KDI doesn't even rank among the 30 biggest managers in the state, but its partners hope that changes as more wealthy individuals and institutions learn about their history. "We've been very much under the radar," Fox says, though both are longtime members of Raleigh's finance community. Day, 61, has worked in investments since 1980, starting as an analyst at former Raleigh brokerage firm Carolina Securities Corp. In 1990, he joined Investors Management Corp., the holding company owned by James Maynard that is best known for its ownership of the Golden Corral steakhouse chain. Maynard wanted Day to help analyze private-equity investments and invest some cash into publicly traded restaurant stocks. By 1996, Day had devised a strategy of focusing on 15 to 25 stocks that he believed could grow by 10% or more annually over a seven-year period. "We question if the stock is a company we'd like to own completely, and it doesn't matter if it is large or small," he says. "Our goal is to have double-digit returns with less risk than the overall market, and our history has shown we can do that."

In 1998, the money-management business was spun out as a separate company, Maynard Capital Partners, then nine years years...